Correlation Between Capitol Federal and Meridian Bank
Can any of the company-specific risk be diversified away by investing in both Capitol Federal and Meridian Bank at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Capitol Federal and Meridian Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Capitol Federal Financial and Meridian Bank, you can compare the effects of market volatilities on Capitol Federal and Meridian Bank and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Capitol Federal with a short position of Meridian Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capitol Federal and Meridian Bank.
Diversification Opportunities for Capitol Federal and Meridian Bank
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Capitol and Meridian is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Capitol Federal Financial and Meridian Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meridian Bank and Capitol Federal is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Capitol Federal Financial are associated (or correlated) with Meridian Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meridian Bank has no effect on the direction of Capitol Federal i.e., Capitol Federal and Meridian Bank go up and down completely randomly.
Pair Corralation between Capitol Federal and Meridian Bank
Given the investment horizon of 90 days Capitol Federal is expected to generate 3.49 times less return on investment than Meridian Bank. In addition to that, Capitol Federal is 1.35 times more volatile than Meridian Bank. It trades about 0.09 of its total potential returns per unit of risk. Meridian Bank is currently generating about 0.43 per unit of volatility. If you would invest 1,350 in Meridian Bank on August 27, 2024 and sell it today you would earn a total of 281.00 from holding Meridian Bank or generate 20.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Capitol Federal Financial vs. Meridian Bank
Performance |
| Timeline |
| Capitol Federal Financial |
| Meridian Bank |
Capitol Federal and Meridian Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capitol Federal and Meridian Bank
The main advantage of trading using opposite Capitol Federal and Meridian Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capitol Federal position performs unexpectedly, Meridian Bank can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Meridian Bank will offset losses from the drop in Meridian Bank's long position.| Capitol Federal vs. Independent Bank | Capitol Federal vs. BankFinancial | Capitol Federal vs. Business First Bancshares | Capitol Federal vs. First Bancorp |
| Meridian Bank vs. Community West Bancshares | Meridian Bank vs. Investar Holding Corp | Meridian Bank vs. Finward Bancorp | Meridian Bank vs. First Financial Northwest |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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